Introduction The invariant principle is a very powerful tool in our armory when we try to devise optimal strategies for playing certain classes of games. …

The concept of iterative dominance is a central concept in game theory. It is useful because it can greatly reduce the size of a player’s strategy space and make life easier for someone trying to find the Nash equilibrium. Let us start with some definitions first. Strongly dominant strategies …

Game theory models can be very useful in a wide variety of settings. Any environment which involves interactions of agents can be described using a game theory model. When the agents are selfish and do not cooperate, the scope is referred to as non-cooperative game theory. On the contrary, when…

We all have that one friend who argues over things like who would have the last pizza slice or take the last sip of soda from the bottle. If you have been using a coin toss to settle those things, it might be time to reconsider. Here’s why. No coin…

There are advertisements everywhere these days. On your television, during your YouTube video, in the middle of the news article on your tablet. Advertisements have a very specific purpose. “Nudging” the potential customer and acquiring her. Some advertisements are good at that, some are terrible. But all the good ones…

Vickrey auctions were so named after Canadian economist William Vickrey who won the Nobel Prize in Economics in 1996 for his ground-breaking work on the economic theory of incentives under asymmetric information. These auctions also go by the name of Second-Price sealed bid auctions. Let’s start by understanding what a…

Braess' Paradox : A fascinating, yet counter-intuitive result Postulated in 1968 by German mathematician Dietrich Braess, Braess’ paradox is one of the most counter-intuitive results in network games. Loosely, it postulates that adding a highway to a network might not ease traffic at all, rather it might lead to higher congestion. Mind = blown, right? Let’s check out…

Our Pollution Problem: Insights from Game Theory Game theory can provide fascinating insights into many of our problems. One such popular instance is the ‘Pollution Game’. The problem is as follows : There are ‘n' countries. Each country incurs a cost of 3 units if they decide to invest in…